- Premium Bonds have been a national institution since 1956
- How do they compare with savings account returns?
- Which? advice on tracking down your lost winnings
How safe is my money if I invest it in premium bonds?
Your original investment is completely safe and you can get it back at any time. However, you may not win enough in prize money to protect your savings from inflation. Other investments, such as National Savings & Investments (NS&I) index-linked savings certificates, offer a more certain, if fairly low return – and they're unlikely to make you a millionaire, of course.
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How likely am I to win a prize?
Every bond is entered into the monthly draw, with winners being selected at random by Ernie (Electronic Random Number Indicator Equipment) the NS&I computer. Around a million bonds win their owners a prize (the odds of winning have been estimated as 26,000 to 1 for every £1 invested). The chances of winning a £1m jackpot are far higher.
How much can I invest in premium bonds?
The most you can hold is £30,000. The minimum quantity of bonds you can currently purchase is £100 worth.
Go further: Investment bonds - these options could all provide a suitable alternative to premium bonds
Do I have to declare premium bond prizes on a tax return?
No. Any winnings are tax-free and are not counted as part of your taxable income, so you don't have to declare them.
How much interest do premium bonds pay?
Premium bonds don't pay any interest in the normal sense. However, the monthly prize 'pot' is generated from interest paid on the total amount invested in bonds. This is currently set at an annual rate of 1.3%. Individual bond holders may get more or less than this, depending on how frequently they win.
How can I find out if I've won a prize each month?
Prize winners are normally notified in writing (or in person if they have won £1m). You can check for recent and 'missed' prizes on the NS&I website by entering your bond holder’s number. If you have lost track of old bonds there is a free tracing service here, too.
Are old premium bonds ignored in the prize draw?
No. All bonds are entered in each month's draw, regardless of their date of issue (provided you have held them for a full calendar month following the month you bought them). A bond purchased in 1959 won the jackpot in July 2004.
It's true that more recent bonds win more often, but that is because there are more of these in circulation. Premium bond sales soared after the top prize was increased to £1m in 1994.
Can I inherit premium bonds from my parents?
Premium bonds can't be transferred, but their value does form part of the estate of the deceased. Executors can claim this from NS&I by completing a special claim form which can be found on the NS&I website or obtained by post from National Savings and Investments, Blackpool FY3 9YP.
So should I put my savings into premium bonds in preference to other options?
Premium bonds offer the thrill of a flutter without the risk of losing your original stake, but they do not offer a guaranteed return. Over the years your money could be eroded by inflation if you don't win regularly, so it makes sense not to put all your money into them.
Alternative investments, such as Best Rate cash Isas, Best Rate savings accounts and are a better bet for long-term savings and investment, particularly for anyone relying on interest to contribute to their income.